Companies That Do Right by Their Workers Start by Elevating Their Definition of Success

Executive Summary

There’s been a ripple of excitement of late as some big companies have unveiled (fairly modest) raises and bonuses for workers. But with unemployment at record lows, yet inequality at record highs, this feels like a time for CEOs to think bigger — not just to raise wages, but to elevate their definition of success about how their companies can win big in the marketplace and afford employees a greater sense of security and participation in the workplace, how they can generate wealth and share that wealth with everyone who has a hand in its creation. John Lewis is a prime example of how this can work, with the organization owned 100% by employees. Is it too much to ask, at a time when so many big companies are enjoying so much prosperity, that their leaders imagine a more expansive and sustainable definition of success for everyone in the company?

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There’s been a ripple of excitement of late as some big companies have unveiled (fairly modest) raises and bonuses for workers. Walmart announced that it would pay out up to $1,000 per employee, depending on seniority, and that it would begin a process of boosting its minimum wage to $11 per hour. American Airlines said it would pay $1,000 to all 127,600 of its people, and Wells Fargo raised its base wage from $13.50 to $15 per hour. A sound economy, a booming stock market, and huge business tax cuts, the story goes, have convinced CEOs of companies flush with cash to distribute some of it to frontline employees.

That story is fine as far as it goes — but does it go nearly far enough? With unemployment at record lows, yet inequality at record highs, this feels like a time for CEOs to think bigger — not just to raise wages, but to elevate their definition of success about how their companies can win big in the marketplace and afford employees a greater sense of security and participation in the workplace, how they can generate wealth and share that wealth with everyone who has a hand in its creation.

So here’s my question for CEOs: Why simply smooth out the rough edges of our “winner-take-all” economy? Why not embrace a more expansive logic of success in which nobody wins unless everybody wins?

It may sound lofty, even a bit naïve, but there is a model for how a more robust and sustainable definition of success can work — and it’s been working for a long time. The John Lewis Partnership is a hugely successful enterprise, with annual revenues of nearly $14 billion, profits of more than $630 million, and some 87,000 employees in England, Scotland, and Wales. Those employees work at two of Britain’s most admired retailers, John Lewis department stores and Waitrose supermarkets, both of which have carved out a powerful bond with customers, both of which have unveiled big innovations in branding, merchandising, and e-commerce.

What truly distinguishes the John Lewis Partnership, though, what makes it such an admired organization at home, and a model for what’s possible elsewhere, is that it is owned 100% in trust for its employees. There are no public shareholders clamoring for higher dividends, no hedge funds gorging on management fees. All 87,000 employees are considered partners in the business. They share in year-end bonuses based on the company’s financial performance, participate in a well-funded pension plan, and enjoy perks that most companies would reserve for their top brass.

Make no mistake: John Lewis and Waitrose are bold, aggressive players in their respective marketplaces, known for high-touch service and booming internet operations. At the same time, they reject the lowest-common-denominator wage-and-benefit policies that define so much of the retail sector, in favor of a commitment to sharing the wealth they create with everyone who helps to create it. This partnership model has become so financially productive, and so socially appealing, that the British government talked openly about the virtues a “John Lewis economy” as a “genuinely inclusive and popular” form of capitalism in which more and more people own a stake in where they work and share in their companies’ profits.

Just as noteworthy, John Lewis operates as a full-fledged democracy that distributes power up and down the ranks. It’s a business in which employees and their elected representatives debate issues large and small. Democracy at John Lewis is not a metaphor or a state of mind. It is a system of management and governance that includes rank-and-file access to financial information, the right to express opinions without fear of retribution, and elections to boards and councils that have a say in strategy. Indeed, the organization takes grassroots participation and shared decision making so seriously that it has 50 full-time “democracy coaches” whose only job is to deepen the level of engagement and participation.

It may sound unwieldy, perhaps downright inefficient, but it’s how things have worked since 1929, and they’ve worked quite well. In fact, it’s all set out in writing, in The Constitution of the John Lewis Partnership. The Constitution established 113 principles that determine how the organization is governed, including a right to “comfortable and businesslike but not luxurious” working conditions, and “openness, tolerance, and freedom to express criticism, questions and suggestions (even at the risk of controversy).” As one senior executive explained to me, “The focus of most companies is to improve their financial capital. Our focus is on social capital.”

To be sure, I don’t expect Walmart, American Airlines, or Wells Fargo to transform themselves into U.S. versions of John Lewis — companies where rank-and-file employees have a major piece of the action, a real voice in strategy, even a vote on who represents them in the boardroom. But is it too much to ask, at a time when so many big companies are enjoying so much prosperity, that their leaders imagine a more expansive and sustainable definition of success for everyone in the company?